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TMI Blog1964 (3) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... his result he wanted to achieve by a declaration executed on the 1st day of May, 1957. It reads as follows: "Having intended and resolved to convert all the properties owned by me into joint family properties of myself and my five undivided sons, I hereby give effect to my intention and resolution by declaring that from now all my properties of myself and my five undivided sons, Satyanarayanamurthy, Raghaviah, Durga Prasad, Gopal Krishnamurthy and Sankar, each of us having a 1/6 (one-sixth) share." Undoubtedly, by this declaration Shri Malakondaiah, who seems to have acquired large properties as an advocate, impressed them with the character of coparcenary property. Malakondaiah seems to have died in March, 1958. Subsequently, the property which formed the subject-matter of the declaration mentioned above was sought to be brought to tax under the Act for the assessment year 1958-59, on the ground that Malakondaiah transferred his self-acquired properties to the Hindu undivided family of which he was a member and had "converted his sole ownership rights in the properties for a share as a coparcener." This was resisted by the assessee on the plea that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the 1st day of April, 1958, a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957) at the rate or rates specified in the Schedule." Section 4 is in the following words: "4. Gifts to include certain transfers.--For the purposes of this Act,-- (a) Where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor." As the other sub-sections are not quite relevant in the context of this enquiry, we shall omit them here. Indisputably, there is no consideration for the conversion of the self acquisitions of Malakondaiah into joint family properties. So, section 4 would be attracted to this transaction if it would amount to a transfer within the contemplation of clause (xxiv) of section 2 of the Act. Before we deal with the import of clause (xxiv), we will do well to refer to the judgment of the Madras High Court in M.K. Stremann v. Commissioner of Income-tax [1961] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) when the father, the assessee, pooled his self-acquired properties with the ancestral joint family property for subsequent division between the members of the coparcenary. If there was a transfer at all, the transferee could only be the coparcenary of which the father was the karta, and not the minor sons, who at that time were still undivided in status. It should be remembered that the pooling or blending of the self-acquired properties with the joint family property preceded in status and the partition of the properties on December 19, 1952. Where the self-acquired properties of a coparcener--in this case the coparcener was the father of the other coparceners and the karta of the coparcenary--are pooled with the joint family property and partitioned, there are three distinct stages. First the self-acquired property of the coparcener is impressed with the character of the joint family property of the coparcenary. The next stage is the disruption of the coparcenary. The members thereafter become divided in status. The next stage after that is the actual division between the divided members of what had been the property of the joint family. Each of these stages may be separated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the family, between himself and his minor sons and wife, would be governed by section 16(3)(a)(iv) of the Income-tax Act or not. It was decided that clause (a)(iv) was attracted to that case, in that the coparcener had distributed his own properties amongst his wife and children in the guise of a partition. The learned judges said [1963] 49 I.T.R. 941, 949: "In our opinion, a separate property of a coparcener cannot be fragmented into shares and disposed of by allotment to shares under the guise of a partition without the element of transfer of property. Unless and until the separate property becomes invested with the character of a joint family property, there cannot be a partition in the real sense of the term because partition would not comprehend in its scope a transference of right from one member to another. An assignment of separate property is essentially a transfer and is not the less so because the parties choose to call it a partition." They were not concerned with the question similar to the one posed itself in Stremann's case [1961] 41 I.T.R. 297. In fact they referred to that ruling and distinguished it on the ground that the separate property becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case [1961] 41 I.T.R. 297. The Bombay decision cited by the learned counsel for the department does not throw any light on this enquiry. It is not, therefore, necessary to refer to it. Although we are more inclined to agree with the law as stated by the Gujarat High Court, we do not think it necessary to express any final opinion on this aspect of the matter as this reference can be disposed of on the interpretation of clause (xxiv)(d) of section 2 of the Act. This definition is of wider import than that contained in the Transfer of Property Act. The only requirement of this clause is that the transaction, which seeks to accomplish certain results, should have the effect of diminishing directly or indirectly the value of his own property and to enhance the value of the property of any other person. Incontestably, by the declaration made by Shri Malakondiah by the conversion of his self-acquired properties into joint family properties, there was a decrease in the value of the property of Shri Malakondiah and it enhanced the value of the property of the joint family. That joint Hindu family answers the description of any other person is seen by clause (xviii) of section 2 which sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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